>"How does the crowd determine the difference between your type 1 and your type 2 companies?"

I'd suggest it comes down to experience. With experience in crowdfunding you can spot the campaigns that are likely to succeed, and which ones are likely to fail. The main problem I see is when campaigns are too ambitious based on the background of the people involved. For example, high volume manufacturing in China without prior experience of working with Chinese manufacturing companies.

Bought out by Facebook -- which is not the norm of most crowdfunded companies. In my personal belief, the crowdfunding model as it exists now is not a form of investment that will scale well. When a kickstarter company fails, it's not liable to all the people it took money from unless by fraudulent circumstances. What I believe will be more viable is a crowdsourced capital fund where an executive acts as a trustee representative and makes investing decisions for us.

Just curious as to why you would disagree. The way I see it -issue more shares with lesser face value when the company is valued. So if you are valued at $4 million issue 400,000 shares of $10 each and crowd fund. If you can't set the valuation, use a bidding process and let the crowd value. No ?

It's a model that could work, but it's not "clearly the model". One reason is that VCs add more value than just money, at least ideally they do. Also, there might be a lack of oversight and accountability. Btw, what you are suggesting sounds alot like an IPO.